Talk:Pensions
Governments strain under retiree obligations :By Debra Erdley, TRIBUNE-REVIEW, June 30, 2008 A raft of reports due today could trigger changes in the rich retirement benefits long thought necessary to lure workers into government jobs. Private industry began reducing and eliminating retiree health care benefits 15 years ago when the Financial Accounting Standards Board required future cost estimates to be reported. But state and local governments are just now beginning to tally the billions they've promised in future benefits. A new Government Accounting Standards Board rule requires the 50 states and the nation's largest cities and counties to disclose those obligations, starting today. The numbers locally -- $8.5 billion for state retirees' health care, $320 million in Pittsburgh, $73 million in Allegheny County, $690 million for the Port Authority and more to come as smaller municipalities begin assessing debts -- are forcing elected officials to consider how they'll pay for it all. If they choose to leave it on the books as an obligation, rather than begin setting aside money every year to pay for it, Wall Street likely will charge those government entities more to borrow money to build schools and highways and fund other capital projects. Either way, taxpayers pick up the tab. Future retiree health care costs are an issue in contract negotiations with Port Authority's Amalgamated Transit Union. The contract expires tonight. Some believe the government will have no option but to follow private business and eliminate or reduce benefits for future retirees. "There was a time when people took those jobs because, while the pay wasn't good, the benefits were. But, within reason, you've seen an adjustment in compensation," said Elliot Dinkin, vice president of Cowden Associates, a consulting and actuarial firm in Pittsburgh. A recent report by the Employee Benefit Research Institute said benefit costs for government employees are 73 percent higher than for private-sector workers. The study said public-sector workers include many skilled people in positions in public safety and education, and noted a high percentage of them are represented by unions. Robert Blendon, professor of health policy and political analysis at Harvard's John F. Kennedy School of Government, said most state and local governments aren't eager to antagonize those unions. "Public employees are often very influential. Telling them their benefits could be reduced is something most executives want to avoid in the short term. ... But it should be on everyone's agenda. If everyone wakes up to this, 10 years from now benefits in the public sector will look more like they do in the private sector," Blendon predicted. Steven Kreisberg, director of collective bargaining for the American Federation of State, County and Municipal Employees, the nation's largest public sector union, said that would be an overreaction. Many public sector retirees passed up salary increases when working in favor of long-term benefits such as retiree health care, Kreisberg said. "These expenses are not payable all at once. They can be paid over three or four decades," Kreisberg said. He likened future retiree health care costs to the obligations states assume every time a child is born and is entitled to 13 years of public education. Actuary Rick Dreyfuss, retired director of employee benefits for Hershey Foods, said retiree health care, unlike public education, is voluntary. "There's no law that says I have to give any of my employees retiree health care," Dreyfuss said. Last fall, while experts were calculating Pennsylvania's obligations, Gov. Ed Rendell's administration boosted prescription copays and fees for doctor office visits for 52,000 retirees. When state totals were tallied in May, costs were reported as $8.5 billion -- $5.5 billion less than previously estimated. Even so, state Budget Secretary Michael Masch recommended creating a trust fund so the state can invest to cover future costs. Pittsburgh Controller Michael Lamb said the disclosure of Pittsburgh's $320 million obligation has had no impact because the city is not borrowing money. "Even though it's an ugly number and it sits on our balance sheet, it's not as detrimental as it would be if we were going out borrowing," Lamb said. "The one thing it does is, it really hits home that number is out there and we have to begin planning to pay for it." category:news coverage